Why Is the North Dakota Land Board Trying to Cost Taxpayers Billions of Dollars?

A drilling rig is pictured near Lake Sakakawea near New Town, N.D., on Thursday, Sept. 8, 2016. Some fear that uncertainty about who owns the minerals under the lake will deter oil development in the area. Amy Dalrymple/Forum News Service

In case you haven’t been following along, here’s some of the back story. Lake Sakajawea is a man-made lake created when the federal government damned the Missouri River back in the 1950’s. At the time people who owned property flooded by the lake were compensated for their surface rights. They were never compensated for their mineral rights, or the ownership of things like oil and gas and gravel under the surface of the land.

For decades that didn’t really matter. There was no good way to develop those minerals, so the rights were essentially worthless. Except then the oil and gas industry discovered techniques like horizontal drilling, and suddenly those minerals under the lake became accessible.

Which prompted the State of North Dakota, through the Land Board which manages the state’s mineral rights, to lay claim to them.

You see, historically the State of North Dakota owns all the mineral rights under the Missouri River. The Land Board has lately tried to claim that all of the mineral rights under the lake belong to the state, not just those under the historical channel of the river.

The Land Board, with the assistance of the AG’s office, has persisted in this endeavor despite the Legislature passing a bill signed into law by Governor Doug Burgum making it clear that the state does not own these mineral rights. The legislation also authorizes the return of some $187 million in royalties collected on the development of minerals under the lake. The North Dakota Supreme Court has held that this law applies retroactively and must be considered by courts adjudicating disputes over mineral rights between private owners and the Land Board.

You’d think that would settle the matter. The state doesn’t own the mineral rights, per the Legislature, so it’s time for everyone to move on. Except, earlier this week the AG’s office filed a motion asking the district court to delay proceedings giving them time to prepare for additional litigation.

At this point the question has to be asked: What exactly is the Land Board hoping to win?

The ND Supreme Court sent this case back to the district court which is waiting for a new survey of the mineral rights claims before settling this matter. The most likely outcome is that the court awards mineral rights to the private owners, meaning the Land Board would have lost their case and achieved nothing for all the time and money the spent on litigating this issue.

But even supposing the unlikely happens and the district court rules that the State of North Dakota owns the minerals, the private owners would still have to be compensated for a government taking. Because, remember, the federal government never paid the land owners for mineral rights back in the 1950’s when the surface rights were taken.

If the district court determines the State owns the minerals, the plaintiffs will be deprived of the mineral interests. The federal government compensated the plaintiffs for the surface property, but the plaintiffs have not been compensated for the mineral interests. The plaintiffs are entitled to compensation if the government’s actions result in a “taking” of the mineral interests.

How much would those mineral interests be worth? I asked the folks at the North Dakota Petroleum Council for some estimates. They said at current market conditions and production levels, the cost of the mineral rights under the lake could be between $2 to $3 billion.

Where is the State of North Dakota going to get billions of dollars to pay off private owners of the mineral rights they’re trying to grab?

This is a lose-lose situation for the Land Board.

They’re probably going to lose in their claim on the mineral rights. But even supposing they win, the cost for taxpayers would be enormous. Literally billions of dollars.

It’s time for the Land Board, and the AG’s office, to hang this one up.

On a related note, I interviewed attorney Josh Swanson who is representing the Wilkinson family in their case against the Land Board. You can listen to our entire interview below: